Toronto-based Scotiabank said concerns over slow global economic growth, little progress in resolving the eurozone debt crisis, as well as disappointment that the US Federal Reserve did not do more to support the ?xml:namespace>US economy, weighted on Canadian commodity prices.

Patricia Mohr, Scotiabank’s vice president of economics, said the decline in prices reflected a “slow grinding down in global growth”, partly due to the eurozone worries and slower growth in China.

The bank's Canadian commodity price index is now down 15.9% from a peak in April 2011, just prior to the advent of concerns from excessive European sovereign debt. However, the correction remains much less than the 46% slide in the second half of 2008, Mohr said.

Canadian oil and gas prices rose 3.6% in May from April, largely because of less congestion on oil export pipelines to the US, Mohr said.

However, Canadian oil prices are under pressure from deliberate Saudi over-production to offset lost Iranian oil following international sanctions because of the country’s nuclear programme, and to prevent the fragile world economy from derailing, she said.

“But with the big slight in Brent [crude oil] down to the $90/bbl mark, we have already seen a lot of relief to consumers around the world and it's time for [the Saudis] to actually rein in supply again,” Mohr said.

Meanwhile, market conditions for Canadian potash were lacklustre as higher producer inventories dampened demand, she said.